To win the respect of intelligent people, and the affection of children,

To earn the appreciation of honest critics, and endure the betrayal of false friends,

To appreciate beauty,

To find the best in others,

To leave the world a bit better, whether by a healthy child, a garden patch, or a redeemed social situation,

To know that even one life has breathed easier because you have lived. This is to have succeeded.

When I started this month’s newsletter I was going to talk about our technical developments where we are making independent financial advice available online at no initial cost and a very low ongoing cost. However the funeral of close member of the family put that on hold and returned me to the eternal question of ‘what is it all for?’

The quote above has been on the front page of my website for over ten years and while in the meantime much has changed on the website this quotation has gained intensity and meaning. When I started helping people with financial advice 27 years ago in January 1990 I became aware that many people do not understand money, they needed help, and this was my chance to make a difference. In this aim I have been successful most of the time. I am lucky to have some wonderful clients and I am always delighted to receive their comments such as the comment that I received from Marie last week:

I just wanted to say a big thank you for your words of encouragement. True friendship multiplies the good in life and you have it in abundance. I’m so lucky to have you as my Financial adviser and friend.

Comments like this are worth far more than money: I haven’t always got it right and sometimes service could have been better (even Marie knows that because she has been kept waiting at times), however balancing giving my time for often ‘too little’ return has meant that sometimes it was impossible to do more. I chose not to focus on higher paying clients because I was reluctant to leave the clients on lower incomes and with low levels of assets to the wolves. My first two clients from January 1990 are still my clients and I am now helping their children. I am currently working on a series of ‘client stories’ to illustrate where I have made difference which will be coming out over the next few months and I hope that you will find it interesting reading.

I am reluctant to finish on a cynical note but on reading the above my business adviser said: “Clients have to be able to take good advice and recognize what is being offered and follow through. Clients often get ripped off to the point to which they deserve!” This is very sad but true – another way of saying: “you can take a horse to water but you can’t make it drink”. So well done to you for having followed through on my advice because I know that you are all better off as a result.

I’ll pick up news of the online services next month. In the meantime, if you have any queries please get in touch.

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“There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.” Donald Rumsfeld US Secretary of State for Defence February 2002

We live in uncertain times and we may not know what 2017 will bring however when it comes to investment one of the things that we know is that Capital Markets work. We may or may not like many of the things that are happening in the political world but investment markets are neutral and they will strive to obtain a market return regardless of politics or circumstances. In case you haven’t read our Investment Policy statement for a while I repeat the number one clause below:

‘Capital markets have consistently rewarded investors for the capital they supply. Companies compete for the supply of investment capital and millions of investors compete with each other on a daily basis for the most attractive returns. This competition drives prices towards fair value so that on any given day a point of equilibrium is reached between the buyers (optimists) and sellers (pessimists) on the price of a security. This price moves randomly and almost instantaneously to reflect new information such that it is difficult for any individual to systematically profit from market miss-pricings. We therefore accept market rates of return.

Many investment managers believe that they can actively exploit market mis-pricings by stock-picking or market-timing – the traditional activities of active fund management. If markets were not efficient then the brightest, hardest-working and most highly paid fund managers would be able to beat a simple buy-and-hold strategy over time. But nearly forty years of academic research has shown that traditional investment managers are unable to outperform markets by anything more that the amount we would expect by chance. Indeed, a multitude of studies has reached the same general conclusion: the average actively managed fund does no better than the market after fees, transaction costs and taxes.’

Our investment portfolios are designed to provide you with the market return and over time you can expect to receive a return on your capital. The amount of that return will depend on your risk profile which determines the amount of volatility that you are comfortable with. Risk and return are related so if you are a higher risk person you can expect a higher return over time. However a word of caution: it has been shown time and time again that investors who invest in portfolios which are too high for their risk profile usually get out when the markets go down and over time they receive much less return than the investor who chooses the correct investment profile at the start and sticks with it.

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I hope that you have a relaxing break and share some good company over the next week or so. As we look back over the news of 2016 there is certainly a lot to think about and I expect 2017 to be just as ‘interesting’.

I received a newsletter from another IFA company a couple of weeks ago and they started by saying that they were not going to comment on Trump’s election because they operated a “value neutral” business and they went on to say that they did not express opinions beyond their (narrow) focus of investment. You will know that this is the polar opposite of where Interface has always positioned itself. For us values always come first and financial matters come second. We believe that there is little point to money unless you can use it to make a difference, whether that is to a single individual, or to create a charitable trust as one of my clients is currently doing. Schindler’s List provides us with a philosophy common to all great world beliefs: “whoever saves one life saves the world entire” — make a difference to one person and your life has been worthwhile.

Financial markets are value neutral but we don’t have to be. The first principle of our Investment Policy statement states: “Capital Markets work” which means that you will get a market return for your investment. Your investments are constructed so that you will receive a return over time and all you need to do is to relax and get on with your lives. Our investment strategy is constructed so that we operate as farmers and continually reap what we sow: we are not prospectors who gamble on finding the strike of a life time. A client said to me last month: “it is not the gold prospectors who get rich it is the shop keepers who sell picks and shovels.” Anyone who wants speculative investment is talking to the wrong company. Our strategy might be less ‘exciting’ but it gets results.

The Christmas break gives us time to reflect and hopefully you will share some precious time with your family and friends. It is those times when we remember what is important and think of our values and what we value. This is my Christmas letter and it is my intention to steer away from politics but I will comment on a discussion taking place this month about swearing an oath to British values. This discussion mentioned democracy and the Queen as being British values and while we have a strong belief in both they are not values; they may be something that we value but they are not values they are belief systems. It is the underlying values which provide the basis for these belief systems. For example neither of these belief systems would be supported without the values of equality and respect.

I recommend that you look at www.interfaceifa.co.uk and spend ten minutes thinking about your own values. My top ten values are: integrity, compassion, respect, contribution, honesty, trust, fairness, loyalty, sincerity, and equality. I think that some of the politicians promoting this oath would do well to take my values exercise themselves (though it might make some of them feel uncomfortable about their promotion of an oath to shared values!)

As we come up to Christmas I reflect on three of my dear clients who passed on this year and are no longer with us. I cherished their company and my thoughts are with their family and friends. I have been very lucky to have shared the last 26 years helping and advising some wonderful clients. I value your loyalty and friendship and I am looking forward to helping more and making a difference in your lives during 2017.

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On Thursday 22nd October I was invited to take part in a discussion group at The Palace of Westminster to discuss providing financial advice and education to young people and the financially challenged. The meeting was presided by the Right Honourable Jonathan Edwards who was introduced as part of the Brexit Unit, fortunately for him he immediately diffused any antagonism by saying: “don’t blame me, I voted Remain.” The tension in the room eased which allowed us to move on to the topic for discussion and for the next two hours or so we discussed how younger people could effectively be provided with financial advice.

The meeting was held in one of The House of Commons committee rooms which allowed me to view the wonderful décor and artwork not available to the general public. After the formalities we were treated to wine and snacks in Portcullis House which is where over 200 MPs have their offices. Of necessity security was extremely tight though it was good humoured and efficient. While I have had the privilege of visiting The Commons, The Lords, Downing Street, and Buckingham Palace previously the latest visit gave me a reminder of what a great political system we have where ordinary people like myself can visit and take part.

I have been trying to help a few ‘younger’ people for the last year or so and the FCA regulatory requirements with the associated costs certainly make this job difficult. I believe that the internet has to be part of the solution to providing cost effective advice. Clients’ use of the Personal Finance Portal grows almost daily and I now receive more secure messages through the Portal than I do from emails, phone calls, and post, put together. Via the Portal we not only exchange messages and documents but clients also view details of their plans and investments where the valuations will soon be updated daily. The Premier Service is normally a paid for service but I provide it to all clients free of charge and clients can link their bank accounts, credit cards, and other investments so that they get a complete overview of all of their assets (and liabilities) in one place. Using this facility they can analyse their spending, set up budgets, set up goals such as saving for a holiday, saving for retirement, or reducing debt.

Within the next couple of weeks personalised investment reports will be delivered to clients via the Portal and there is a lot more in development which will be released over the next few months.

With the younger investor in mind the ‘Automated Advice’ section of the Portal was released a couple of weeks ago to a select group of clients and using this facility clients can invest in an ISA or general investment account. Currently the facility to invest lump sums is live but regular premiums will follow soon and pensions and protection is in development. Where this will come into its own is with children of my existing clients who know they ought to be saving in an ISA or a pension but do not want to go to the expense of a full advice review. They will soon be able to start an ISA or a pension at say £25 or £50 a month from the comfort of their own iPad or tablet and then log into their account and see the balance of their accounts alongside their bank accounts and goals. And not only is there no initial fee, the ongoing charge is less than half of the charge of other major companies such as Hargreaves Lansdown.

With the smaller investor being taken care of via the Portal more time will be available for my existing clients. However they are not being missed out of development and one great example is DocuSign which is being added to the Portal within a month or so. DocuSign allows you to sign documents digitally without returning a “wet” signature and though some of you will have used it already the integration with the Portal is going to put everything in one place.

I was impressed last month when one of my clients aged 78 signed up to The Portal and started exchanging messages and documents, though I appreciate that some of you may need help so please get in touch.

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On 24th March 2015 Germanwings Flight 9525 was deliberately crashed by the co-pilot killing all 150 people on board. There are few of us who fly were not affected by the recordings of the screams of the passengers and the shouting of the pilot who was outside the cockpit trying to break in with an axe.

Well last night I awoke in a sweat because I was on that plane except this time the plane was being flown by Theresa May. We know that there is going to be a crash but no one is taking any notice of those of us outside who are trying to hammer the door down. I heard the brexperts saying: “Don’t worry these modern planes can bounce”, and “It will be bumpy but we will be better after the experience.”

I am really feeling for my clients whose continual comment is: “I didn’t vote to leave so why should I be so much poorer?” I have tried to put their minds to rest but what I haven’t told them is that you may not have seen anything yet. One retired client with about £200,000 in cash who likes to travel was almost in tears when he said that his cash had gone down in value by about 15% — “that’s a loss over three months of about £30,000 off my retirement plans he said”. He went on to tell me that he should have listened to me and put more of his cash into investment because his investment portfolio had gone up by almost 10% over the last year. I didn’t disillusion him but all we try to do when we invest is to beat inflation and make a bit more and managing to do that with what is to come will be challenging for all of us. When Article 50 is triggered and the banks start relocating from the UK who knows how low the pound will go. A month ago the experts (the ones that I respect) had suggested that we could reach parity with the Euro by the end of the year, well that was reached last week in some Exchanges and now there is talk of it going much lower perhaps 80 pence to the Euro instead of the £1.30 that is was on 31st of May.

So putting on my financial advice hat what do I recommend: You keep your money invested in one of our low cost, highly diversified, portfolios. These are risk rated to each of you and they aim to keep any volatility to a minimum. They have a global presence so that they have some shielding from what is happening in the UK. I am very pleased that all of my clients are very happy about their investments but there is little that I can do about the suicidal team in control. If you have cash it is not too late to invest because the fall in the value of the pound has some way to go. (As an alternative you could get ‘a bigger axe!’ – I’m going to the Birmingham Liberal Democrat Conference in Birmingham next month which is the first time that I have been involved in politics.)

One of my concerns is the possibility that Mark Carney, The Governor of The Bank of England, will not stay around too long. He has been one of the voices of sanity but has come under increasing criticism from the ‘brexperts’ some of whom are saying that we need higher interest rates. If he goes and interest rates go up you may think that would be good for your cash savings but that will fuel inflation even more and your savings are unlikely to keep up. If you have debt then it may be the time to look at getting a good fixed rate. My nightmare didn’t go that far but I vividly remember Black Wednesday on 16th September 1992 which resulted in interest rates going up to 15% (that would add about £1000 a month to an average mortgage). The chancellor then was Nigel Lawson, a leading Brexiteer, and I listened to him again last week – he is living in world of his own and thinks high interest rates could help the economy.

The only ‘good’ news that I’ve been given over the last few months was from my business adviser when she said: “clients need good independent financial advice more than ever and you are going to be busy.” She is absolutely right though I wish that I was helping clients in calmer more happy times.

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Today is the Autumn Equinox (well almost) which is the time in the Northern hemisphere when the length of the day and night become equal; it is the start of Astronomical Autumn. We usually say that it occurs on the 21st September but because of variations in the calendar and the movement of the earth and the stars it can occur at any time between the 20th and the 24th. This year in the UK it’s at 15.21 BST on 22nd September.
The movement of the seasons is as predictable as life itself. We all know where we are in the passage of time though it is not something that we choose to dwell on. We like to live as if we are immortal but deep down we know that time is precious and that it ebbs away with each passing day. Three of my clients have died this year: the first was 88 and the second was 91, they lived life to the full and they made me feel uplifted each time we met. They are sadly missed but as my mother used to say: “they had had a good innings”. On the other hand my third client died last month at age 37 and this is tragic. She leaves behind a husband and two children. What has made it more tragic is that despite my attempts they were always “too busy” to review their finances. They were after all ‘immortal’, and who can blame them, I felt like that at 37 and I still do! She died with insufficient life insurance and no Will in place and I am helping the husband to sort things out as best as we can (a little like bolting the stable door). Money had to be borrowed from family in order to pay the £6000 for the funeral.
PLEASE do not make the same mistake. Everyone needs to have their Will and Lasting Powers of Attorney in place and they need to be reviewed regularly. Your finances need to be organised and arranged using trusts if necessary and you need a pre-paid funeral plan in place. Many of my clients reading this will be feeling satisfied at this point because they can say that they already tick all of these boxes. However if you have yet to complete one or more do not delay and get in touch with us today. We know that the Equinox will occur within two days of the 22nd but death or disability is not so predictable.

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I have spent over 25 years trying to help my clients navigate the maze of financial planning and I have always aimed to put people before profit. I have approached my business from the perspective of how much value and service I could provide to my clients so I was not inspired by the title of one of the sessions at a seminar for IFAs last month which was called: ‘How much should you should charge your clients for your services and make a profit’. The seminar demonstrated that many IFAs think differently to me, they put profit at the top of their priorities, and they charge considerably more for their services.

The presenter started by telling us that we are available for work 44 weeks of the year after taking out 8 weeks for holidays, bank holidays, Christmas, illness, and so on. For a 5 day week this equates to 220 working days. Two days each week are taken up with seminars, keeping knowledge up to date, regulatory reporting, and other essential matters, which leaves only 132 days for client work. If one day each year is spent on each client this means that the business can manage 132 clients, if two days are spent on each client then we can only help 66 clients and so on.

I was looking around the room at this point, many of the attendees were nodding in agreement, but I was sceptical, and not sure that I even wanted to be there. However I stayed and he next asked us how much it cost to maintain the business, he wanted the base cost before we paid any money to ourselves or made a profit. People started getting involved and various figures were mentioned, all of them much higher than mine. I operate from a room at my home address, all support is outsourced, and I use technology to maximise efficiency and drive down costs. For the financial year to 31st March my base costs were £82,000 or almost £7000 a month. It was no surprise to find that many IFA firms had a base cost much higher with some saying £15,000 a month, and for some approaching £30,000.

We were then asked to add what we thought was a reasonable personal income considering our experience, qualifications, and financial risk. This is where people started becoming animated and there was a heated discussion with some ‘loud’ differences in opinion. To the disgust of many I put mine down as £40,000 a year and they protested that the figure ought to be at least six digits. However I refused to budge so I arrived at a total of £122,000 after the base costs and personal income were added together.

I thought that we had finished but at this point he mentioned the FCA requirement that all businesses should be profitable, sustainable, and build up a capital reserve, so we had to add in another figure. I decided to keep quiet and for simplicity I added £10,000 to bring the total income to £132,000 because I had anticipated what was coming next and I wanted to keep the sums easy.

You don’t need a calculator to show that my rate was £1000 per working day but I was surprised when some said that their minimum daily rate was £5000 or more. And while I was expecting that my rates were much lower but it did surprise me to realise that after taking out the base costs and capital reserve, only £300 is left for personal income out of every £1000 received by the business. I would like to bet that very few of you know how much it costs to maintain an IFA business!

So while I was a reluctant attendee, the seminar was useful because I was left feeling satisfied that I am providing good value for the service that I provide and that clients could pay a lot more elsewhere that is if they could get independent financial advice at all. I am sticking my neck out and I hope that you agree so if you have any questions or comments I would be very pleased to hear from you.